In 1993, when Drabinsky and Gottlieb began contemplating taking Livent public, Kofman demanded that the phony billing scheme come to an end. But his fears that participation in the scheme was the only way he was going to get paid appeared to be well founded. After formally breaking ties with King Commodity Services, Livent ignored Kofman's legitimate bills for nearly eight months, he testified.

Kofman's financial situation became so dire that he confronted Drabinsky in a car ride the pair took to check out a prospective project in Brantford, Ontario. When Kofman complained about his difficulty getting paid, Drabinsky allegedly shot back that Kofman had already been paid millions of dollars. Kofman was taken aback and maintained that most of that money had actually been funneled back to Livent. The exchange prompted Kofman to write a memo to Drabinsky in March 1994 that included a chart showing that while Livent paid Kofman just over $8.3 million between 1991 and 1994, more than $5.8 million was ultimately re-directed back to Gottlieb and Drabinsky as part of the alleged phony invoice scheme.

While he could not recall how the idea originally came up, Kofman testified that Livent founders Myron Gottlieb and Garth Drabinsky told him he would have to pay the men personally for "business development" work that was never actually performed. Kofman, in turn would bill Live Entertainment Corporation of Canada — a predecessor to Livent — for that allegedly bogus work as well as any other legitimate engineering work Kofman performed. In his opening statement last week, chief Livent prosecutor Robert Hubbard alleged that the phony invoice scheme was an attempt to circumvent bank covenants that limited the amount of money Drabinsky and Gottlieb could take out of the company.

The scheme of charging Kofman for business development work was ironic since Drabinsky and Gottlieb often complained about any work Kofman did for his other clients, he said. "If there was a bone of contention it was that they (Drabinsky and Gottlieb) did not want us to do work for anyone else," Kofman testified.

The arrangement changed in 1990 when Gottlieb told Kofman that the payments would no longer go to Drabinsky and Gottlieb personally, but would be funneled through a company called King Commodity Service — a company in which Gottlieb was president. Kofman signed an agreement with Gottlieb agreeing to hire King as its fiscal agent for a fee of $2 million a year. Kofman continued to pay King's bills which, in turn, were always reimbursed by Livent. However, to this day Kofman told the court he has no idea what King Commodity Services did and maintains that the company never did any actual work for this company.